Correlation Between 5E Advanced and Loop Industries

Can any of the company-specific risk be diversified away by investing in both 5E Advanced and Loop Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining 5E Advanced and Loop Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5E Advanced Materials and Loop Industries, you can compare the effects of market volatilities on 5E Advanced and Loop Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in 5E Advanced with a short position of Loop Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and Loop Industries.

Diversification Opportunities for 5E Advanced and Loop Industries

-0.42

Correlation Coefficient

5E Advanced  Loop Industries

Very good diversification

The 3 months correlation between FEAM and Loop is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and Loop Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Industries and 5E Advanced is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on 5E Advanced Materials are associated (or correlated) with Loop Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Industries has no effect on the direction of 5E Advanced i.e., 5E Advanced and Loop Industries go up and down completely randomly.

Pair Corralation between 5E Advanced and Loop Industries

Given the investment horizon of 90 days 5E Advanced Materials is expected to under-perform the Loop Industries. But the stock apears to be less risky and, when comparing its historical volatility, 5E Advanced Materials is 1.27 times less risky than Loop Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Loop Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Loop Industries on May 12, 2025 and sell it today you would earn a total of  65.00  from holding Loop Industries or generate 66.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

5E Advanced Materials  vs.  Loop Industries

5E Advanced Materials

Risk-Adjusted Performance

Weakest

Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, 5E Advanced is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Loop Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loop Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Loop Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 5E Advanced and Loop Industries

The main advantage of trading using opposite 5E Advanced and Loop Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced position performs unexpectedly, Loop Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Loop Industries will offset losses from the drop in Loop Industries' long position.

The idea behind 5E Advanced Materials and Loop Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.